Current Affairs
June 16, 2022
Furniture Update
Furniture manufacturers project sales gains: FDMC 300 special report By Karen M. Koenig June 2, 2022 | 2:47 pm CDT
Design for commercial and home spaces is blending, as seen in this lounge set by Indiana Furniture (#154).
Despite recent sales fluctuations and the ongoing material and labor supply issues, the outlook for 2022 and 2023 remains optimistic for both residential and contract furniture manufacturers.
According to Allied Market Research, the global demand for furniture — residential and commercial — will hit $800.6 billion USD by 2025, at a CAGR of 3.5% (2018-2025). The residential segment dominates the market due to the surge in renovations, plus the growing infrastructure and real estate market. Commercial furniture growth is being driven by companies investing in refurbishing offices for social distancing and flexible or hybrid workplaces.
Ken Smith, managing partner at Smith Leonard, said, although new orders fell 20 percent in February compared to 2021, it’s “not all that bad” considering 2021 figures were up 24 percent over February 2020. Although shipments were flat compared to February 2021, about 66% of participants in the April Furniture Insights reported year-over-year and year-to-date gains.
The commercial market is also rebounding as employees return full- or part-time (hybrid) to the workplace, the hospitality/travel industry resumes and schools return to onsite learning.
For the education market furniture segment, Research and Markets reports the North American school furniture market reached $2.1 billion in 2021, and is projected for $2.8 billion by 2027, exhibiting a CAGR of 5.2 percent during 2022-2027.
Based on information compiled in the annual FDMC 300 report, along with projections by some of North America’s largest manufacturers, the roughly $14.billion office furniture market (BIFMA/IHS Markit-2020) is also looking up.
See Strategies for Success – sidebar below
Optimism prevails
The FDMC 300, an annual ranking of the largest wood products producers in North America, saw sales for those in the contract and residential furniture segments reach an estimated $15.9 billion and $16.3 billion respectively in 2021. Overall, sales in both segments look to be positive for 2022, with those interviewed projecting the same or better revenues as last year.
“2022 sales will be higher than 2021 by 40 percent,” noted Greg Kooistra, production planning manager at Watson Furniture Group (#160). Noting the strong demand for office furniture as people return to work, the company is also projecting 2023 sales to be “excellent.”
“For our overall contract business, we will exceed sales in 2021,” said Todd Holderness, general manager, Contract Interiors for Fellowes, which owns Trendway Corp. (#103) as well as ESI. “Corporate and SLED (state and local government and education) sectors are driving a significant part of that growth in our core product categories,” he added. 2023 also projects to be good, “if the economy holds and the government spend happens on the projects we are working on in the next six months,” Holderness added.
Max Verkamp, president and CEO of Indiana Furniture (#154) also said his company is projecting 2022 to surpass 2021 figures, adding “demand is very strong for all segments of office furniture from case goods to seating.”
And while the company is projecting growth for 2023, Verkamp noted, “it is difficult to ascertain the rate of growth at this time. The amount of increasing discussion from some economists and financial firms regarding a potential recession in the near future is forcing us to look at our growth expectations for next year.”
Likewise, those in the residential segment are also projecting higher sales for 2022 and beyond.
“Our sales will be up in 2022,” said Gat Caperton, CEO of Gat Creek (#220). The increases will result mostly from pricing, he said, noting “we are producing at 100% capacity.”
Projections for 2023 are also “excellent,” he added. “We have worked through the bubble that COVID created and the new normal is nice and high.”
Along with constraints due to COVID, “the foam shortage due to the freeze in Texas severely limited the amount of product we could build for 2021,” commented Rick Coffey, president of McCreary Modern Inc. (#54). 2022, however, is a different story with output up about 25 percent compared to 2021 figures, he added, with projections for 2023 “excellent, with historic backlogs.”
Sales are also on the upswing at Witmer Furniture (#263). “We expect 2022 sales to exceed 2021 sales as our customers’ demand continues to be strong and we have a large backlog as well,” said Kevin Schlinkmann, president. “We are currently in a large expansion phase which will allow us to build and ship more product this year than we did in 2021.”
Schlinkmann added, “We are projecting sales in 2023 to remain good and domestic demand to be strong as the cost and availability of containers continue to be an issue for imported product.”
Projections for 2022 and 2023 are also good for Best Home Furnishings (#45). “2022 sales will be up,” said Steven Wahl, CFO and treasurer, noting the company was still “recovering from the 2020 major sales decline” last year. He added, “We also dealt with major supply chain issues in 2021 that affected our ability to build product. The supply chain issues appear to be getting better now, but we haven’t felt the impact of the Shanghai shutdown yet for imported components.”
Challenges ahead
“Like other manufacturing industries, supply chain slowdowns and labor shortages continue to work through the system,” said Dierdre Jimenez, president and CEO of BIFMA, the trade association for business and institutional furniture manufacturers.
Jackie Hirschhaut, vice president of the American Home Furnishings Alliance (AHFA) and executive director of its outdoor division, the International Casual Furnishings Association (ICFA), agreed. “There are challenges, especially with material supplies, and the manufacturers are doing everything to battle through until they can return to the robust state pre-pandemic,” she said. “We expect these challenges to soften, although they’ll probably be with us for at least another year.”
Kooistra, Wahl and Coffey were among those also citing supply chain issues, along with inflationary costs, and a shortage of labor among the top challenges facing their companies.
“Our biggest issue continues to be labor constraints. If we could find the people, we would hire 200 people today,” Wahl noted. “This is about an additional 20 percent to our existing workforce.” He added, “Though supply chain issues appear to be getting better, we are so dependent on overseas components that another extended lockdown in China would limit our production capacity.”
“Spot shortages continue to create disruptions in the products we can build,” Coffey said. “Inflation on the two major components in our product increased by 38 percent in the last 12 months. And labor, skilled and unskilled, is impossible to attract and secure.”
“Outside of supply chain challenges and the overall economic indicators, our other top concern for this year and next will be adding quality talent throughout all levels of the organization,” added Holderness.
Caperton concurred. “We need to further expand our workforce and expect the labor shortage will last for years,” he said. “We are all now recruiters. Building an expansion carries a ton of risk – cost to complete, good function, and continuing demand. Plus, we need to find more good employees for the work.”
Verkamp agreed. “The worker shortage and the supply chain disruptions are limiting factors for us in producing the product for which we have received orders. As we look beyond 2022, it is the increasing discussion about a potential recession in the near future.”
Growth opportunities
Both residential and office furniture manufacturers continue to benefit from consumers investing in products for the home, particularly as the work from home trend shows no signs of waning.
“The macroeconomics for housing and home furnishings look very strong for the next decade,” said Caperton. “Of course, it will be bumpy, but things are strong and improving thanks to demographics and the current shortage of houses.”
It’s not limited to indoors. A new study by Wakefield Research, on behalf of the ICFA, shows that COVID-inspired nesting has motivated 78 percent of Americans to upgrade their outdoor living space in the past year. In addition, 63 percent said they will upgrade their outdoor furniture or accessories this year, according to the annual ICFA Outdoor Furnishings Trend Report.
“Consumers who were thinking about upgrading their outdoor space are doing so now to enjoy their increased time at home in more style and comfort,” Hirschhaut said. “The pandemic has not stopped manufacturers from creating new styles and designs, and retailers are working hard to make sure consumers have access to what makes them happy.”
“People continue to invest in their homes as they are spending more time there,” Schlinkmann also noted. “Building a high-quality, affordable, domestic product will continue to give us opportunities to increase our market share.”
“It appears ‘Made in America’ is starting to mean something again,” Wahl added. “Domestic residential furniture manufacturers should benefit from this. Though we have a global economy, a lot of retailers don’t feel as comfortable relying on import product deliveries as they did prior to the pandemic.”
A number of manufacturers also commented on investments made in technology and facility upgrades to increase their capacity and capabilities.
“We have made major investments in our internal supply chain facilities to enable growth and assure quality components and timely deliveries,” said Coffey.
Watson has also “focused on manufacturing automation,” noted Kooistra.
Verkamp added, “We are optimistic for the future of the office furniture industry and for Indiana Furniture. Here at Indiana, we significantly invested in our product and our operations over the past two years so that we can continue being a strong partner to our dealers. Our new, consolidated manufacturing facility, which will open up in Q4 of this year, will allow us to enhance our abilities to service our customers.”
Holderness also noted, “We have continued our R&D and new product development projects the past two years and are excited about the success of recent and future launches.”
“Speaking as an architect and designer, from my perspective, as humans we continuously seek to improve our quality of life through the safety and functionality of our environments. The evolution of environments we work, learn, heal, and live in depend on the innovation of products that advance these goals,” said Jimenez. “It’s a journey and the furniture industry plays a key role in that journey.”
As a byproduct of the increased focus on environmental and social impacts, the association has seen increased interest in the LEVEL by BIFMA furniture sustainability certification. “We continue to work with manufacturers and industry stakeholders to elevate the work the furniture industry has done in this area,” she added.
FDMC 300 firms offer strategies for success
We asked some of the FDMC 300 furniture manufacturers to share a tip for succeeding in the coming year. Here’s what they had to say:
• “Stay focused on your plan and remain customer obsessive with your best customers,” said Todd Holderness, general manager, Contract Interiors for Fellowes (Trendway Corp. #103, and ESI).
• “Honest communication with your vendors and customers in a timely manner is more important than ever,” said Steven Wahl, CFO and treasurer, Best Home Furnishings (#45). “Our industry has never experienced a time like this. When problems develop, and for most people that happens on a daily basis today, let your vendors and customers know about them as soon as possible. Don’t sugarcoat the problem. Give them honest answers, and don’t set unreasonable expectations that you will not be able to meet.”
• “Invest in equipment and continue to expand your pool of vendors to get raw materials,” said Kevin Schlinkmann, president, Witmer Furniture (#263).
• “Assume nothing and source domestically,” said Rick Coffey, president, McCreary Modern Inc. (#54).
• “Continued creativity in all facets of the business is required!” said Greg Kooistra, production planning manager, Watson Furniture Group (#160).
• “The best way to have a crappy employee is to offer a crappy job,” said Gat Caperton, CEO, Gat Creek (#220). In other words, don’t do it.
• “We have to listen to what our customers and our employees are telling us and make appropriate adjustments. The expectations for both are changing,” said Max Verkamp, president and CEO, Indiana Furniture (#154).
“From a customer perspective, what an office is and looks like is evolving. Thus, we need to understand the needs of our customers and ensure we have product solutions for them. This may involve repurposing some of our current products and/or developing new products. The expectations of employees also are changing, and we must ensure we understand their needs and are addressing them appropriately.”
Verkamp added, “I recently heard a speaker say that the war for talent is over and that the talent has won. I believe there is a lot of truth in that comment. Just as the office is evolving, how we manage our people must evolve. Those that don’t do so will be left behind.”
(More tips by large, mid-size and small wood products manufacturers are in the WOOD 100: Strategies for Success at WoodworkingNetwork.com/WOOD-100.)
About the FDMC 300
More than 115 furniture manufacturers are included in the 2022 FDMC 300, an annual report that tracks the largest manufacturers in North America and ranks them by sales. Updates of the FDMC 300 firms can be found at WoodworkingNetwork.com/FDMC-300, along with industry snapshots and interviews. For information on how to be included, contact karen.koenig@woodworkingnetwork.com.
June 16, 2022
Furniture Update
Furniture manufacturers project sales gains: FDMC 300 special report By Karen M. Koenig June 2, 2022 | 2:47 pm CDT
Design for commercial and home spaces is blending, as seen in this lounge set by Indiana Furniture (#154).
Despite recent sales fluctuations and the ongoing material and labor supply issues, the outlook for 2022 and 2023 remains optimistic for both residential and contract furniture manufacturers.
According to Allied Market Research, the global demand for furniture — residential and commercial — will hit $800.6 billion USD by 2025, at a CAGR of 3.5% (2018-2025). The residential segment dominates the market due to the surge in renovations, plus the growing infrastructure and real estate market. Commercial furniture growth is being driven by companies investing in refurbishing offices for social distancing and flexible or hybrid workplaces.
Ken Smith, managing partner at Smith Leonard, said, although new orders fell 20 percent in February compared to 2021, it’s “not all that bad” considering 2021 figures were up 24 percent over February 2020. Although shipments were flat compared to February 2021, about 66% of participants in the April Furniture Insights reported year-over-year and year-to-date gains.
The commercial market is also rebounding as employees return full- or part-time (hybrid) to the workplace, the hospitality/travel industry resumes and schools return to onsite learning.
For the education market furniture segment, Research and Markets reports the North American school furniture market reached $2.1 billion in 2021, and is projected for $2.8 billion by 2027, exhibiting a CAGR of 5.2 percent during 2022-2027.
Based on information compiled in the annual FDMC 300 report, along with projections by some of North America’s largest manufacturers, the roughly $14.billion office furniture market (BIFMA/IHS Markit-2020) is also looking up.
See Strategies for Success – sidebar below
Optimism prevails
The FDMC 300, an annual ranking of the largest wood products producers in North America, saw sales for those in the contract and residential furniture segments reach an estimated $15.9 billion and $16.3 billion respectively in 2021. Overall, sales in both segments look to be positive for 2022, with those interviewed projecting the same or better revenues as last year.
“2022 sales will be higher than 2021 by 40 percent,” noted Greg Kooistra, production planning manager at Watson Furniture Group (#160). Noting the strong demand for office furniture as people return to work, the company is also projecting 2023 sales to be “excellent.”
“For our overall contract business, we will exceed sales in 2021,” said Todd Holderness, general manager, Contract Interiors for Fellowes, which owns Trendway Corp. (#103) as well as ESI. “Corporate and SLED (state and local government and education) sectors are driving a significant part of that growth in our core product categories,” he added. 2023 also projects to be good, “if the economy holds and the government spend happens on the projects we are working on in the next six months,” Holderness added.
Max Verkamp, president and CEO of Indiana Furniture (#154) also said his company is projecting 2022 to surpass 2021 figures, adding “demand is very strong for all segments of office furniture from case goods to seating.”
And while the company is projecting growth for 2023, Verkamp noted, “it is difficult to ascertain the rate of growth at this time. The amount of increasing discussion from some economists and financial firms regarding a potential recession in the near future is forcing us to look at our growth expectations for next year.”
Likewise, those in the residential segment are also projecting higher sales for 2022 and beyond.
“Our sales will be up in 2022,” said Gat Caperton, CEO of Gat Creek (#220). The increases will result mostly from pricing, he said, noting “we are producing at 100% capacity.”
Projections for 2023 are also “excellent,” he added. “We have worked through the bubble that COVID created and the new normal is nice and high.”
Along with constraints due to COVID, “the foam shortage due to the freeze in Texas severely limited the amount of product we could build for 2021,” commented Rick Coffey, president of McCreary Modern Inc. (#54). 2022, however, is a different story with output up about 25 percent compared to 2021 figures, he added, with projections for 2023 “excellent, with historic backlogs.”
Sales are also on the upswing at Witmer Furniture (#263). “We expect 2022 sales to exceed 2021 sales as our customers’ demand continues to be strong and we have a large backlog as well,” said Kevin Schlinkmann, president. “We are currently in a large expansion phase which will allow us to build and ship more product this year than we did in 2021.”
Schlinkmann added, “We are projecting sales in 2023 to remain good and domestic demand to be strong as the cost and availability of containers continue to be an issue for imported product.”
Projections for 2022 and 2023 are also good for Best Home Furnishings (#45). “2022 sales will be up,” said Steven Wahl, CFO and treasurer, noting the company was still “recovering from the 2020 major sales decline” last year. He added, “We also dealt with major supply chain issues in 2021 that affected our ability to build product. The supply chain issues appear to be getting better now, but we haven’t felt the impact of the Shanghai shutdown yet for imported components.”
Challenges ahead
“Like other manufacturing industries, supply chain slowdowns and labor shortages continue to work through the system,” said Dierdre Jimenez, president and CEO of BIFMA, the trade association for business and institutional furniture manufacturers.
Jackie Hirschhaut, vice president of the American Home Furnishings Alliance (AHFA) and executive director of its outdoor division, the International Casual Furnishings Association (ICFA), agreed. “There are challenges, especially with material supplies, and the manufacturers are doing everything to battle through until they can return to the robust state pre-pandemic,” she said. “We expect these challenges to soften, although they’ll probably be with us for at least another year.”
Kooistra, Wahl and Coffey were among those also citing supply chain issues, along with inflationary costs, and a shortage of labor among the top challenges facing their companies.
“Our biggest issue continues to be labor constraints. If we could find the people, we would hire 200 people today,” Wahl noted. “This is about an additional 20 percent to our existing workforce.” He added, “Though supply chain issues appear to be getting better, we are so dependent on overseas components that another extended lockdown in China would limit our production capacity.”
“Spot shortages continue to create disruptions in the products we can build,” Coffey said. “Inflation on the two major components in our product increased by 38 percent in the last 12 months. And labor, skilled and unskilled, is impossible to attract and secure.”
“Outside of supply chain challenges and the overall economic indicators, our other top concern for this year and next will be adding quality talent throughout all levels of the organization,” added Holderness.
Caperton concurred. “We need to further expand our workforce and expect the labor shortage will last for years,” he said. “We are all now recruiters. Building an expansion carries a ton of risk – cost to complete, good function, and continuing demand. Plus, we need to find more good employees for the work.”
Verkamp agreed. “The worker shortage and the supply chain disruptions are limiting factors for us in producing the product for which we have received orders. As we look beyond 2022, it is the increasing discussion about a potential recession in the near future.”
Growth opportunities
Both residential and office furniture manufacturers continue to benefit from consumers investing in products for the home, particularly as the work from home trend shows no signs of waning.
“The macroeconomics for housing and home furnishings look very strong for the next decade,” said Caperton. “Of course, it will be bumpy, but things are strong and improving thanks to demographics and the current shortage of houses.”
It’s not limited to indoors. A new study by Wakefield Research, on behalf of the ICFA, shows that COVID-inspired nesting has motivated 78 percent of Americans to upgrade their outdoor living space in the past year. In addition, 63 percent said they will upgrade their outdoor furniture or accessories this year, according to the annual ICFA Outdoor Furnishings Trend Report.
“Consumers who were thinking about upgrading their outdoor space are doing so now to enjoy their increased time at home in more style and comfort,” Hirschhaut said. “The pandemic has not stopped manufacturers from creating new styles and designs, and retailers are working hard to make sure consumers have access to what makes them happy.”
“People continue to invest in their homes as they are spending more time there,” Schlinkmann also noted. “Building a high-quality, affordable, domestic product will continue to give us opportunities to increase our market share.”
“It appears ‘Made in America’ is starting to mean something again,” Wahl added. “Domestic residential furniture manufacturers should benefit from this. Though we have a global economy, a lot of retailers don’t feel as comfortable relying on import product deliveries as they did prior to the pandemic.”
A number of manufacturers also commented on investments made in technology and facility upgrades to increase their capacity and capabilities.
“We have made major investments in our internal supply chain facilities to enable growth and assure quality components and timely deliveries,” said Coffey.
Watson has also “focused on manufacturing automation,” noted Kooistra.
Verkamp added, “We are optimistic for the future of the office furniture industry and for Indiana Furniture. Here at Indiana, we significantly invested in our product and our operations over the past two years so that we can continue being a strong partner to our dealers. Our new, consolidated manufacturing facility, which will open up in Q4 of this year, will allow us to enhance our abilities to service our customers.”
Holderness also noted, “We have continued our R&D and new product development projects the past two years and are excited about the success of recent and future launches.”
“Speaking as an architect and designer, from my perspective, as humans we continuously seek to improve our quality of life through the safety and functionality of our environments. The evolution of environments we work, learn, heal, and live in depend on the innovation of products that advance these goals,” said Jimenez. “It’s a journey and the furniture industry plays a key role in that journey.”
As a byproduct of the increased focus on environmental and social impacts, the association has seen increased interest in the LEVEL by BIFMA furniture sustainability certification. “We continue to work with manufacturers and industry stakeholders to elevate the work the furniture industry has done in this area,” she added.
FDMC 300 firms offer strategies for success
We asked some of the FDMC 300 furniture manufacturers to share a tip for succeeding in the coming year. Here’s what they had to say:
• “Stay focused on your plan and remain customer obsessive with your best customers,” said Todd Holderness, general manager, Contract Interiors for Fellowes (Trendway Corp. #103, and ESI).
• “Honest communication with your vendors and customers in a timely manner is more important than ever,” said Steven Wahl, CFO and treasurer, Best Home Furnishings (#45). “Our industry has never experienced a time like this. When problems develop, and for most people that happens on a daily basis today, let your vendors and customers know about them as soon as possible. Don’t sugarcoat the problem. Give them honest answers, and don’t set unreasonable expectations that you will not be able to meet.”
• “Invest in equipment and continue to expand your pool of vendors to get raw materials,” said Kevin Schlinkmann, president, Witmer Furniture (#263).
• “Assume nothing and source domestically,” said Rick Coffey, president, McCreary Modern Inc. (#54).
• “Continued creativity in all facets of the business is required!” said Greg Kooistra, production planning manager, Watson Furniture Group (#160).
• “The best way to have a crappy employee is to offer a crappy job,” said Gat Caperton, CEO, Gat Creek (#220). In other words, don’t do it.
• “We have to listen to what our customers and our employees are telling us and make appropriate adjustments. The expectations for both are changing,” said Max Verkamp, president and CEO, Indiana Furniture (#154).
“From a customer perspective, what an office is and looks like is evolving. Thus, we need to understand the needs of our customers and ensure we have product solutions for them. This may involve repurposing some of our current products and/or developing new products. The expectations of employees also are changing, and we must ensure we understand their needs and are addressing them appropriately.”
Verkamp added, “I recently heard a speaker say that the war for talent is over and that the talent has won. I believe there is a lot of truth in that comment. Just as the office is evolving, how we manage our people must evolve. Those that don’t do so will be left behind.”
(More tips by large, mid-size and small wood products manufacturers are in the WOOD 100: Strategies for Success at WoodworkingNetwork.com/WOOD-100.)
About the FDMC 300
More than 115 furniture manufacturers are included in the 2022 FDMC 300, an annual report that tracks the largest manufacturers in North America and ranks them by sales. Updates of the FDMC 300 firms can be found at WoodworkingNetwork.com/FDMC-300, along with industry snapshots and interviews. For information on how to be included, contact karen.koenig@woodworkingnetwork.com.
June 16, 2022
Railroads, Union Negotiations Update
“Ticking Time Bomb” Begins As Major US Railroads, Union Labor Seek Biden Intervention Amid Rail Shutdown Concerns
by Tyler DurdenThursday, Jun 16, 2022 – 05:45 AM
Negotiations between major railroads and their unions have stalled, setting up for what could be a significant railroad shut down before the midterm elections that could paralyze an already-strained US supply chain.
Railway Age reports the National Mediation Board (NMB) on June 14 began what could be a “ticking time bomb” toward a national railroad shut down within 90 days, following its board of three, two Democratic members agreeing with rail labor and NMB’s only Republican disagreeing that means a voluntary agreement to amend unionized rail worker wages, benefits and work rules won’t be achievable.
Talks between rail labor (12 rail craft unions bargaining in two coalitions on behalf of 115k rail workers) and major railroads, including Union Pacific Corp. and BNSF Railway Co., will enter a 30-day cooling period this Friday. Then the Biden administration may appoint a Presidential Emergency Board (PEB) to resolve the dispute.
“The railroads would consider accepting the proffer, but the union leadership has already indicated that it will not,” the National Carriers’ Conference Committee (NCCC), which represents major railroads, said in a statement. “The railroads expect a PEB will be appointed in this dispute before the end of the 30-day cooling-off period, as has been the case in prior unresolved national rail negotiations,” NCCC continued.
Once the PEB is appointed, a second cooling period with a maximum 30-day clock begins. At the same time, the PEB listens to arguments from rail labor and railroads and issues its non-binding recommendations. The third 30-day period is where things could get problematic, just before the elections, and if both parties don’t agree, either side can declare “self-help,” meaning a strike would materialize.
A rail strike would devastate the economy even more, as approximately 28% of freight movement is transported on complex rail networks across the country. Depending on the strike’s duration, supply chains would be further snarled and unleash unwanted inflation.
Let’s hope rail labor and major railroads can agree on wages, benefits, and work rules immediately following the PEB appointment and unions do not resort to a strike in the third 30-day cooling period right before the midterm elections.
June 16, 2022
Railroads, Union Negotiations Update
“Ticking Time Bomb” Begins As Major US Railroads, Union Labor Seek Biden Intervention Amid Rail Shutdown Concerns
by Tyler DurdenThursday, Jun 16, 2022 – 05:45 AM
Negotiations between major railroads and their unions have stalled, setting up for what could be a significant railroad shut down before the midterm elections that could paralyze an already-strained US supply chain.
Railway Age reports the National Mediation Board (NMB) on June 14 began what could be a “ticking time bomb” toward a national railroad shut down within 90 days, following its board of three, two Democratic members agreeing with rail labor and NMB’s only Republican disagreeing that means a voluntary agreement to amend unionized rail worker wages, benefits and work rules won’t be achievable.
Talks between rail labor (12 rail craft unions bargaining in two coalitions on behalf of 115k rail workers) and major railroads, including Union Pacific Corp. and BNSF Railway Co., will enter a 30-day cooling period this Friday. Then the Biden administration may appoint a Presidential Emergency Board (PEB) to resolve the dispute.
“The railroads would consider accepting the proffer, but the union leadership has already indicated that it will not,” the National Carriers’ Conference Committee (NCCC), which represents major railroads, said in a statement. “The railroads expect a PEB will be appointed in this dispute before the end of the 30-day cooling-off period, as has been the case in prior unresolved national rail negotiations,” NCCC continued.
Once the PEB is appointed, a second cooling period with a maximum 30-day clock begins. At the same time, the PEB listens to arguments from rail labor and railroads and issues its non-binding recommendations. The third 30-day period is where things could get problematic, just before the elections, and if both parties don’t agree, either side can declare “self-help,” meaning a strike would materialize.
A rail strike would devastate the economy even more, as approximately 28% of freight movement is transported on complex rail networks across the country. Depending on the strike’s duration, supply chains would be further snarled and unleash unwanted inflation.
Let’s hope rail labor and major railroads can agree on wages, benefits, and work rules immediately following the PEB appointment and unions do not resort to a strike in the third 30-day cooling period right before the midterm elections.
June 10, 2022
Trucking Strike in South Korea
S Korea truckers’ strike to hit Ulsan petrochemical output; halts port ops
Nurluqman Suratman
10-Jun-2022Full storyRelated newsRelated contentContact us SHARE THIS
SINGAPORE (ICIS)–The ongoing nationwide strike by unionised truckers in South Korea are forcing several producers in the petrochemical hub of Ulsan to consider production cuts amid logistics disruption.
Synthetic rubber giant Kumho Petrochemical is expected to slash production rates at its acrylonitrile butadiene styrene (ABS) and polystyrene (PS) units from the second half of June due to the strike, according to market sources.
HDC Hyundai Engineering Plastics Co is also expected to slash production at its 160,000 tonne/year PS plant in the complex.
While there have been no immediate reports of polyethylene (PE) production losses due to the strike, facilities in Ulsan and elsewhere in the country could be affected if the strike drags on.
The strike by the Cargo Truckers Solidarity (CTS) union entered its fourth day on Friday.
Some PE producers may face pressure to sell prompt cargoes or further reduce their cracker run rates owing to the ongoing strike by truckers.
If the transportation problem persists, “I expect more PE plants in South Korea will cutback or shut down in the short term,” ICIS senior analyst Amy Yu said.
The strike has slowed down the delivery of PE cargoes, raising concerns that some producers might have to lower their downstream operation, to manage their already high inventory if the logistic issues continue next week.
“South Korea is a major exporter in Asia PE market, which may lead to a decrease in the supply of short-term exports,” Yu said.
“In addition, due to the high naphtha cost, the average operating rate of steam crackers and PE plants in Korea has shown a relatively low level. The strikes may exacerbate this situation,” she added.
For polyethylene terepthalate (PET), export deliveries were able to continue this week as some cargoes had been prepared before the strike started, however domestic deliveries faced challenges with the reduced trucking capabilities.
For propylene, the country’s exports may increase should the strike be prolonged as domestic distribution of derivative products becomes disrupted, market sources said.
A senior truckers union official quoted by newswire agency Reuters on Friday said that the number of vehicles entering the complex in the country’s east has been cut to one-tenth of normal levels.
The union also plans more stringent strike action at other petrochemical complexes across the country, the unnamed official told Reuters.
The general strike by CTS under the wing of the Korean Confederation of Trade Unions, was launched on 7 June.
The truckers were demanding the government to extend a freight rate system, which guarantees basic wages to cope with surging fuel costs. The system was due to expire in December.
South Korea’s Ministry of Land, Infrastructure and Transport had expected some 7,500 members, representing about 35% of the CTS union, to go on strike on Friday,
There have been “local transport obstructions in some ports such as Busan Port and Ulsan Port. Carry-out volume is reduced compared to normal”, the ministry said.
Traffic at the Busan port, which accounts for 80% of container activity in the country, was down to a third of normal levels on Friday, Reuters reported, quoting a government official.
At the port of Ulsan – the industrial hub where much of the strike action has occurred – movement of containers has totally been suspended as of Friday morning due to the strike, according to Reuters.
Around 1,000 truckers were protesting at the main complex of Korea’s biggest automotive manufacturer Hyundai Motor in Ulsan on Friday, Reuters reported.
Hyundai operates the world’s largest integrated automobile manufacturing facility in Ulsan which has an annual production capacity of 1.6m units. The strike has halved Hyundai’s production in Ulsan.
The automotive sector is a major downstream industry for petrochemicals.
Focus article by Nurluqman Suratman
Additional reporting by Trixie Yap, Yeow Pei Lin, Hazel Goh and Julia Tan
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